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Burger King Boosts Same-Store Sales 4.5%

Branded XBox Games and Kids Meals Credited With Lift

CHICAGO (AdAge.com) -- Burger King's domestic same-store sales grew 4.5% in the second quarter, and CEO John Chidsey is counting on the chain's soon-to-launch Breakfast Value Menu to continue that momentum.
The promotion and sales of Burger King-branded Xbox 360 game titles 'Sneak King,' 'Pocketbike Racer' and 'Big Bumpin' helped boost the chain's same-store sales for the period.
In a meeting with analysts today, Mr. Chidsey credited the sales jump to 99-cent kids meals and burger-branded Xbox 360 video games, which he said sold more than 3.2 million copies in the U.S.

An industry first
The Breakfast Value Menu, an industry first coming Feb. 19, includes a new Hamlette ham-and-egg breakfast sandwich and Cheesy Tots potatoes and will be supported later in the year and into fiscal 2008, said Russ Klein, Burger King's exec VP-chief marketing officer. Citing "significant" traffic gains and high margins, he called the menu test "one of our most successful" of the past four years.

Breakfast now contributes 12% to 13% of Burger King sales, with the Southeast and Southwest regions being strongest during that mealtime, Mr. Klein said. He said the company's breakfast sales have potential to grow, considering that breakfast accounts for 22% to 25% of sales at McDonald's. "We're certainly not saying we're going to hit there in a year by any stretch of the imagination," he said, "but you can see there's a lot of ground to be gained."

While its Oakbrook, Ill.-based rival has been garnering plenty of positive press over its extended hours and Snack Wrap offering, Burger King has lagged by comparison. Despite skeptical franchisees, Burger King executives said the chain has doubled the number of operators participating in its own extended-hours program. Still, that means only about 20% of the franchisees are involved in the program, and the low number of participants creates a roughly $100,000 per-store sales disadvantage compared to McDonald's, estimated Mr. Klein.

Wraps pushed back
Burger King also pushed back tests for its own wrap-style product called Hold'Ems after mulling the operational efficiencies for it as an all-day product rather than just a lunch or breakfast product, Mr. Chidsey said.

"To make sure we launch it as an all-day product, we just wanted to take an extra couple of months and make sure we had it right," he said. "So that will launch very early in fiscal '08 as opposed to the last quarter of '07."

Management didn't mention the year-end exit of Chief Concept Officer of Denny Post, who led product initiatives, as a factor in the delay. She joined Starbucks Coffee Co. in a yet-unnamed position.

Average restaurant sales grew $297,000, or 6%, over the same period last year to an annual average of $1.16 million, a record high. Yet No. 2 Burger King still has a way to go to reach its $1.3 million goal and the $1.5 million average for McDonald's.